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Alarm sounds over housing boom

THE continuing boom in house prices has heightened fears of a sharp slowdown in the property market.

George Buckley, an economist at Deutsche Bank, said: “The higher house prices go, the greater the risk that an external shock will cause a correction.”

Last week, the Bank of England raised interest rates by a quarter of a percentage point in the hope that a modest increase will take some of the heat out of the market without causing prices to plummet.

The decision by the Bank’s monetary policy committee followed a report by Halifax that showed annual house-price inflation still riding high at 16%. The typical home now costs £145,610.

House prices have hit their highest levels relative to incomes since records began two decades ago. The average home now costs 5.09 times the buyer’s annual salary, according to Halifax. When a similar level was reached in 1989 it was followed